Lege gets set to tackle payday lending

The good news is that the Lege is ready to tackle legislation dealing with the scourge of paydaylenders. The bad news can be summarized by the following remarks in this Chron story.

This week, State Rep. Vicki Truitt, R-Keller, will ask the Texas House to approve a package of three bills written as part of the extraordinary compromise efforts.

Truitt, who chairs the Texas House committee overseeing the issue, summoned mediators from the University of Texas School of Law to craft legislation that would induce lobbyists to drop their opposition.

“The status quo is not acceptable,” Truitt said. “I called the industry people together and told them, if you have to have regulation, this is the Legislature to do it in,” referring to the overwhelmingly conservative membership. “With the makeup of the House, now’s a good time. And I am taking control.”

In other words, this is a legislature that’s dominated by people who don’t really care about the poor and will gladly adopt a minimalist bill that the payday lenders’ lobby can live with so that they can quit having to deal with all these annoying advocates. I never thought I’d say this, but Tom Craddick is showing real leadership on this issue:

Normally suspicious of government regulation, a few years ago, Craddick heard the heartrending tale of a Midland housekeeper who took out a payday loan for a family funeral and fell into a quagmire of debt. Each time she failed to pay her debt in full, it was rolled over into a new loan – with costly fees added each time. In seven months, what started as a $5,000 debt grew to more than $10,000.

The incident outraged Craddick, who tried and failed last session to pass a bill regulating the industry. He does not believe Truitt’s bills go far enough.

Operating as “consumer service organizations,” payday and auto title lenders escape regulations on interest rates by charging exorbitant fees. Until that loophole is closed, Craddick said the industry will continue to make 61 percent of its national profits in Texas, the only state with no regulation.

He also has a personal reason for not trusting industry representatives. After he filed his bill last session, he got an offer from the industry: “If I withdrew the bill, they would fly down and pay off that (the housekeeper’s) loan,” Craddick recalled. When the bill failed, Craddick redoubled his commitment.

“It’s awful,” Craddick told a House committee early in the legislative session. Church money given to the poor ends up in the hands of a payday lender when it “could have been used to buy groceries for a family or a toy for a child at Christmas.”

When a guy like Tom Craddick gets it, you wonder what is holding anyone else back. You’d think the issue of making payday lenders operate under the same basic rules as banks would be a no-brainer, but that’s the power of the lobby and a few million bucks.

State Sen. John Carona, R-Dallas, said he is sponsoring Truitt’s bills in the Senate. Sen. Wendy Davis, D-Fort Worth, is advocating stricter legislation, but Corona said he considers Truitt’s legislation an important first step.

“Nobody said these bills are perfect, but they absolutely are better,” he said. “It is a modest first step toward regulating this industry.”

No, subjecting them to the same rules about lending money as banks would be a modest first step. What Rep. Truitt is pushing is inadequate. Sen. Davis’ bill passed out of committee three weeks ago and is on the Senate intent calendar, but likely lacks the votes to come to the floor. Unfortunately, something inadequate is the best we’re going to get. We’re going to need a better legislature before we can do a better job of this.

2 Comments

Where can people with bad credit, or challanged credit go to get a loan? A person has to have a 650 or apove credit score to get a loan at a bank or credit union. What happens when people with challenged credit have a emergency, like a funeral or some sort of accident that requires instant cash? They cant go to their banks or credit unions, even if they have a clear title to their car, theres no loans available for these people. These loans are for emergencys. Really there should be legislation to make the banks and credit unions more flexable to loan out money. These banks have money to loan, there just afraid to loan it, incase the loan goes bad.